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The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) established a voluntary outpatient prescription drug benefit, known as Medicare Part D. The Centers for Medicare & Medicaid Services (CMS) is responsible for implementing this benefit. This new drug coverage will be provided through competing private Part D plans sponsored by health care organizations, which may charge premiums, deductibles, or copayments for drugs. As a result of MMA, on January 1, 2006, drug coverage for dual-eligible beneficiaries will transition from Medicaid to Medicare Part D. This transition will occur for approximately 6 million full-benefit dual-eligible beneficiaries--Medicare beneficiaries who receive full Medicaid benefits for services not covered by Medicare. CMS is in the process of implementing this transition. During May and June 2005, CMS mailed notices to these beneficiaries informing them of the transition in coverage and that they will receive a subsidy to cover their entire deductible and help cover any prescription drug plan (PDP) premiums. During October and November 2005, CMS automatically assigned dual-eligible beneficiaries to PDPs and mailed notices to these beneficiaries informing them of the assignment and also that they may select a different PDP if they wish. If they do not switch from their assigned PDP by December 31, 2005, CMS will automatically enroll them in that drug plan with coverage effective January 1, 2006. MMA provides that, after that date, dual-eligible beneficiaries may switch PDPs at any time. Dual-eligible beneficiaries are poorer and tend to have far more extensive health care needs than other Medicare beneficiaries. They are also more likely to be disabled, at least 85 years old, or to have cognitive impairments. Congress raised concerns that the single-day transition from one type of drug coverage to another could create difficulties in ensuring that prescriptions for this vulnerable population are filled. Congress asked us to review (1) the potential problems that may arise during the transition and (2) the contingency plans that CMS, PDPs, and states have developed to respond to potential problems with the transition.

We identified three potential problems that may leave some dual-eligible beneficiaries facing difficulties immediately obtaining necessary drugs beginning January 1, 2006. The likelihood and magnitude of these potential problems is not known. First, some individuals may not be identified for automatic enrollment in a PDP due to potential inaccuracies in state or federal data. Second, not all beneficiaries who become dually eligible in late 2005 and beyond may be identified and automatically enrolled by the date they become dually eligible. Third, given that MMA and implementing regulations require that dual-eligible beneficiaries be randomly enrolled in PDPs using two criteria--the region in which the beneficiary resides and the amount of the PDP premium--beneficiaries' prescription drugs may not be on their PDP formulary or their customary pharmacy may not be in their PDP pharmacy network. CMS, PDP, and state contingency plans address potential problems with the transition. Although each of these contingency plans is useful in mitigating risks for dual-eligible beneficiaries, their effectiveness is uncertain. For dual-eligible beneficiaries who do not have Medicare drug coverage because they were either not identified and enrolled on January 1, 2006 or are newly qualified dual-eligible beneficiaries, CMS has developed a point-of-sale enrollment mechanism designed to enable pharmacies to assist these beneficiaries in obtaining immediate Part D coverage. The agency signed a contract with a designated PDP on November 22, 2005 to implement this mechanism. Because these arrangements were completed less than 6 weeks before the transition is to occur, limited time remains to educate all pharmacies about its availability and details of its operation. For beneficiaries who were enrolled in a PDP but do not have their PDP information, CMS has facilitated a new information-technology process, known as the Eligibility Transaction, that will allow pharmacies to identify a beneficiary's PDP and provide the beneficiary with the PDP's contact information. As with the point-of-sale enrollment mechanism, it is unclear to what extent pharmacies are informed about the Eligibility Transaction and will use it. Despite CMS efforts to publicize this tool to industry organizations, a pharmacy industry association representative stated that it is unclear how many independent drug stores, which dispense the majority of the nation's retail prescription drugs, plan to use the Eligibility Transaction. To assist dual-eligible beneficiaries with prescriptions for drugs not on their PDP's formulary, according to CMS, all PDPs will offer dual-eligible beneficiaries at network pharmacies first fills of prescriptions for drugs not covered by formularies. First fills will give beneficiaries time to work with a physician to switch to a formulary drug, file an appeal for a formulary exception with their PDP, or switch PDPs. However, in order to obtain a first fill without paying out-of-pocket, beneficiaries must be at a network pharmacy. CMS officials stated that PDP formularies are robust and access to PDP pharmacy networks is broad. However, they noted that PDP formularies typically include upwards of 80 percent of the 100 most commonly used drugs. We did not evaluate the extensiveness of PDP formularies or pharmacy networks. To provide beneficiaries with time to resolve problems they may encounter and thereby minimize disruptions in treatment, state Medicaid agencies have the option to offer early or extended drug refills to dual-eligible beneficiaries prior to January 1, 2006. However, because of financial disincentives associated with the transition, state officials indicated that not all states are expected to provide such refills.